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Zurich India Equity

For its large-cap, quality stock biases and diversity as well as above average returns, Zurich India Equity is an attractive core holding for a growth portfolio

Zurich India Equity Fund (ZIEF) seeks to provide long term growth of capital. And its risk-conscious tendencies have helped it weather the market's recent turmoil better than a lot of growth funds. The fund's 10.02 per cent loss over the past one year ended Oct. 25, 2001 is hardly worth cheering about, but it is much less than the 24.73 per cent average fall of diversified equity funds.

The fund's large cash stake (average of 14% of assets in the past year) has cushioned against the downdraft in growth stocks. But the fund manager, Chandresh Nigam says, that he will rather hold cash than take rash investment decisions.

Following a buy and hold strategy with fundamentally strong growth stocks, the fund has been a winner. The fund invests only in a universe of companies satisfying the minimum investment criteria. This include quality management, distinct competitive advantage which allows the company to grow faster than its peers, market leadership, high profitability indicators and potential to grow profits (as measured by earnings per share) by over 20% per annum for minimum 5 years. And to reduce the portfolio risk, the fund diversifies across major industries and economic sectors.

Launched in 1994, the fund has a six years history. However, the fund's strategy is at work since the management change three years ago. Earlier, ZIEF was called Centurion Quantum, and it languished in a bear market following the 1994 IPO boom. And rigidly following its investment philosophy has worked very well for the fund. Even in the tech frenzy, the fund followed prudent diversification. ZIEF's 3-year return of 28.77 per cent handsomely beats the Nifty with a 5.16 per cent and BSE Sensex's 2.77 per cent.

The fund is currently overweight on pharmaceutical stocks with 29 per cent allocation. And the fund manager's stakes are mainly in the Indian pharmaceutical majors -- Cipla, Ranbaxy and Dr Reddy's Labs. He justifies them for the bright outlook coming on the back of surge in US generic exports and cost competitiveness in new drug research. The fund holds a small tech allocation of 8 per cent in September 2001 down from 28 per cent in June. The rationale according to fund manager - his discomfort with the valuations in relation to the next 12 months expected financial performance.

For its large-cap and quality stocks bias and diversity makes it an attractive core growth long-term holding.